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Petrol

Volume 167: debated on Wednesday 14 February 1990

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To ask the Secretary of State for Trade and Industry when he will publish the Monopolies and Mergers Commission report on petrol; and if he will make a statement.

I am today publishing the report by the Monopolies and Mergers Commission on the supply of petrol by wholesale in the United Kingdom.The Monopolies and Mergers Commission has concluded that petrol wholesaling is a competitive industry at present. It has found that neither the structure, the practices nor the profits in the industry operate against the public interest. The Monopolies and Mergers Commission has accordingly made no recommendations for change.The supply of petrol is a key part of the nation's economy and a matter of considerable interest to individual consumers. Petrol alone accounts for 3 per cent. of consumer expenditure. Any defects in competition could have serious consequences for the public interest. It is right that issues that have caused public concern should have been subjected to close and careful scrutiny and I am grateful for the Monopolies and Mergers Commission's expert work in carrying out this investigation.The main findings of the Monopolies and Mergers Commission are that:

the price of petrol is primarily governed by movements in the underlying price of crude oil and the international market price for petrol, and particularly by their prices on the Rotterdam market;
United Kingdom pump prices are not out of line with those in European countries or movements in consumer prices;
price rises are not implemented more quickly than price falls;
there is no evidence of collusion between the companies; petrol exchanges between wholesalers reduce costs to consumers and are pro-competitive;
petrol company profits on wholesaling have been no more than moderate in recent years and on their downstream operations as a whole they have been low;
there are no significant barriers to entry to the wholesale market;
the hypermarkets and independent chains provide strong and growing competition in the retail market, and
most consumers can choose from a range of prices and standards of service.

The Monopolies and Mergers Commission found that a complex monopoly exists in favour of 69 oil companies that supply over 95 per cent. of the market. However, it concludes that the facts found do not operate against the public interest, that no steps are being taken by the monopolists to exploit the situation, and that the market is a competitive one. Since there are no adverse findings in the Monopolies and Mergers Commission's report, the question of remedies does not arise.

I have received the Director General of Fair Trading's advice on the report. He endorses the overall conclusions the Monopolies and Mergers Commission has reached on the public interest. The director general agrees with the Monopolies and Mergers Commission that future changes could increase the scope for anti-competitive behaviour in the industry. Accordingly he believes that his office should, in three years' time subject to any developments in the meantime, carry out a review of company ownership in the industry and an assessment of developments in competition. In the meantime, he will keep under review any major changes which affect conditions of competition in the industry, though without seeking all the further more detailed information suggested by the Monopolies and Mergers Commission. I agree that the director general should proceed in this way and I shall keep the House informed of any developments.

I accept the analysis in the Monopolies and Mergers Commission's report and am grateful to the commission for having produced a substantial document reflecting the outcome of a wide-ranging and intensive investigation.